FreePakistan exists for the promotion of individual freedom, private property, market economy, limited constitutional government, and the rule of law. Its vision is a free and prosperous Pakistan; for only such a Pakistan can contribute positively to the creation of a free and prosperous world.
FreePakistan is an affiliate of Alternate Solutions Institute, Lahore, a registered non-profit non-political first free market think tank of Pakistan, whose mission is to seek solutions to the challenges in the areas of economy, law, education and health in accordance with the principles of classical liberalism, and to promote the implementation of these solutions.
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Alternate Solutions Institute and FreePakistan Newsletter wish its supporters, subscribers and readers a VERY HAPPY EID.
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CONTENTS:
0 The Tax Poem
By A. Nonymous
0 The Question Is: To Privatize or Not to Privatize
0 Letters to FreePakistan
0 Letters from the Press
0 FreePakistan News Briefs
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DISCOVER YOUR POLITICAL LEANINGS! World's Smallest Political Quiz
Take the Quiz now and find out where you fit on the political map!
http://www.theadvocates.org/quiz.html
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PHILOSOPHY OF LIBERTY
What is Philosophy of Liberty? A screensaver by Lux Lucre and Ken Schoolland explains it.
Download and install it. http://www.free-market.net/rd/321907219.html ; http://www.jonathangullible.com
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ALTERNATE SOLUTIONS INSTITUTE’S FIRST BOOK OF TRANSLATION
Alternate Solutions Institute, Lahore, Pakistan, has published its first book of translation, Ken Schoolland's "The Adventures of Jonathan Gullible: A Free Market Odyssey," in Urdu which is understood not only in Pakistan but throughout South Asia. Ken's modern fable has so far been published in 29 languages of the world Urdu being the 30th. This book explains the principles of market economy in a simple manner and helps promote the concepts of open market and property rights. The book has been translated into Urdu by Khalil Ahmad. A. S. Institute is indebted to Irshad Ameen for his tireless efforts in getting the book out of the press.
It is hoped that the book will give a new direction to the discussion of welfare state in Pakistan.
If you want to purchase the book, contact at info@asinstitute.org ; khalil@asinstitute.org
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HOW TO END ALL WARS FOREVER
Aslam Effendi, an old and unsung Libertarian of Pakistan, has written three books on free market philosophy: HOW TO END ALL WARS FOREVER, HARD FACTS OF HISTORY, and, ECONOMICS FOR THE CONFUSED. When no publisher agreed to invest in the project, he spent out of his own pocket to get HOW TO END ALL WARS FOREVER printed. But, for want of a distributor, this book which has been praised as a classic remained dumped and could not find its way to the market. For details, read ‘Aslam Effendi: A Free Marketeer in Pakistan’
or visit http://asinstitute.org/articles.php. Alternate Solutions Institute, Lahore, Pakistan, has purchase all the copies of the book from Aslam Effendi to make it available to the right persons and to compensate the author as well.
If you want to purchase the book, contact at info@asinstitute.org ; khalil@asinstitute.org
A. S. Institute intends to publish all of his books; if you are interested in this project, please contact at the above-given email addresses.
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As the Alternate Solutions Institute, Lahore, participated in a project of the Atlas Economic Research Foundation , it contributed the following report that can be accessed by clicking the following link:
"TAX-EVASION AND MONEY-LAUNDERING IN PAKISTAN: AN OVERVIEW" by Khalil Ahmad
http://www.atlasusa.org/reports/esid_Pakistan2004.doc
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THE TAX POEM
A. Nonymous
Tax his land, tax his wage,
Tax his bed in which he lays.
Tax his tractor, tax his mule,
Teach him taxes is the rule.
Tax his cow, tax his goat,
Tax his pants, tax his coat.
Tax his ties, tax his shirts,
Tax his work, tax his dirt.
Tax his chew, tax his smoke,
Teach him taxes are no joke.
Tax his car, tax his grass,
Tax the roads he must pass.
Tax his food, tax his drink,
Tax him if he tries to think.
Tax his sodas, tax his beers,
If he cries, tax his tears.
Tax his bills, tax his gas,
Tax his notes, tax his cash.
Tax him good and let him know
That after taxes, he has no dough.
If he hollers, tax him more,
Tax him until he's good and sore.
Tax his coffin, tax his grave,
Tax the sod in which he lays.
Put these words upon his tomb,
"Taxes drove me to my doom!"
And when he's gone, we won't relax,
We'll still be after the inheritance tax.
THE QUESTION IS: TO PRIVATIZE OR NOT TO PRIVATIZE
[Nowadays, in most of the government circles in Pakistan, ‘Privatization’ is the catchword. Once the slogan was: Nationalization for the People. Now it has turned to: Privatization for the People. The latest evidence is the news that the Government of Punjab, the greatest province of Pakistan, is seriously thinking of privatizing the WASA (Water and Sanitation Agency). In the wake of these reports, The News, one of the top national English dailies, last month, ran a Special Report on the issue of water-supply privatization. Below are produced parts of the Report with due thanks both to The News and the contributors.]
WHAT'S IN PIPELINE: Editorial
The system needs to be privatised since it is inefficient. The system has to be made only efficient and not privatised. Infrastructure cannot be privatised. A service cannot be privatised. Government is inefficient and must pass on responsibilities into private hands. The private parties cannot be expected to think about the welfare of the people. They invest for profit, and may end up charging more for a limited service.
There is no end to the stream of thoughts that accompany a privatisation possibility in Pakistan, a country caught between an inefficient system and untried private option. Amid reports that the Punjab government may be seriously thinking of privatisation as the panacea for the problems that have come to be associated with Water and Sanitation Agency (Wasa) the debate has been revived. Should we or shouldn't we?
It is not restricted to the basic issue of the public versus the private. There are other concerns. Even among those who favour privatisation, there are those who advise patience, lest we do something that will be difficult to repair. Old stories are rotten from the start, the new stories must have a sound and happy beginning. They must come at a price that is affordable to all. They must not always be set in developed locales and must bring out and remove disparities between areas.
This Special Report is devoted to a model which, if selected, can be replicated at other places within the country. But it is by no means the first attempt of its kind. Ten years ago, Karachi was faced with a similar situation and while the idea was rejected through a Sindh High Court ruling, the city's water woes continue. There has been no privatisation, and no improvement of the existing system. Ten years without sufficient water is a long time. Which reminds us that we must learn to resolve our problems quickly, in whichever way we favour. Long debates and little action will serve no purpose.
AMENITY: WATER WORKS
The Punjab government is considering privatisation of Wasa, but officials believe all the agency needs to survive is a little more freedom.
By Hamid Ali
The Punjab government is considering privatisation of the Water and Sanitation Agency (Wasa), Lahore, and the reasons behind the thought are inefficiency and an inability to generate the funds required for improving the water and sewerage facilities in the provincial metropolis.
Last month, the provincial government signed an agreement with the International Finance Corporation (IFC), a wing of the World Bank, to conduct a comprehensive study on the organisational and operational structure of Wasa to identify a possible role for private sector participation in water services.
The seriousness of the government can be gauged from the fact that contrary to normal procedure, the government has committed a special grant of up to $2.5 million to facilitate the IFC study. The cost of the study - the first step towards privatisation - is estimated to be around $5 million.
The IFC has reportedly managed to generate around $8,00,000 from international donor agencies and will be allowed to charge a success fee of close to $2 million from the winning bidder at the time of the privatisation process to cover its total cost of study.
At the time of writing this report, a five-member World Bank delegation comprising water and sanitation specialist Alain Locussol, consultant David Dowall, urban advisor Patricia Clarke, senior urban specialist Shahnaz Arshad and country director John Wall is in Lahore to discuss private investment opportunities in the water and sanitation sectors. The delegation has already held meetings with senior officials of the provincial and district government, Wasa, LDA and Solid Waste Management (SWM) Department. This one-week visit is a follow up of the initial agreement between IFC and the Punjab government.
IFC officials have since been visiting Wasa headquarters and getting information from Wasa officials about flaws and loopholes in the agency's working and administration. "We offered help willingly because we thought these people were representing some donor agency interested in financing a Wasa project. We had no idea that they were helping the government to privatise Wasa," a Wasa official tells TNS (The News on Sunday).
Punjab Chief Minister Chaudhry Pervaiz Elahi formally gave his consent to the agreement after holding a meeting with IFC officials in Islamabad on June 29, 2004. The chief minister told the meeting that Wasa needed to be privatised because the provincial and local governments could not provide the huge funds required for improving water and sewerage facilities in Lahore and other cities of the province. He also said the project should not be confined to water services and a private party must also be invited to set up a sewerage treatment plant. "It should be based on extending coverage, sensitivity to the lower income groups and no unnecessary increase in tariff. An effort should also be made to reduce and rationalise tariffs," he stressed during the meeting.
Moazzam Maikin of IFC enumerated how Lahore offered a good opportunity for such a venture, as currently there were considerable operational inefficiencies and wastage in the system. "The recent raise in tariff and the possibility of generating revenue through reducing operational losses could make this an attractive proposal for the private sector," he said. He also told the meeting that there had been a successful participation of the private sector in the water and sanitation services all over the world in recent years, which had led to greater efficiency, more coverage and at times reduced tariff. He presented Manila, Philippines as a role model for the privatisation of water and sewerage services.
After signing the agreement last month, IFC investment analyst George Nigent wrote letters from Washington D.C to different private companies, inviting interested companies for consultancy on the Wasa Lahore project. "IFC, a member of the World Bank, has secured commitments of trust funds for an assignment to assess the potential to attract private sector participation through possible long term concessions in the water distribution system and sewerage network in the district of Lahore, Pakistan," stated one of the letters.
The Punjab government has asked IFC to finalise the entire transaction in one year. The P&D (Planning and Development) department has set up a special cell at its head office to oversee the process of study and involvement of the private sector in water services. Sources in the department confirm that water sector projects are not an area of IFC's speciality and it was acting only as a broker.
Before judging IFC's performance it is important to first find out if water services even need to be privatised or not?
There is no doubt that people have been facing problems at the hands of Wasa in Lahore. The service of water supply is satisfactory to an extent, but complaints about sewerage problems are common. This means that a waste water treatment plant is where the major investment needs to be focussed at. Most other problems with Wasa can be resolved without making any huge investments. All it needs is a little independence in important decisions and some organisational changes to run the system effectively.
According to Wasa officials most of the agency's revenue problems can be solved if the Punjab government helps it recover more than Rs 28 billion outstanding in arrears. Over 250 departments of the provincial and federal governments including police, educational institutions, government hospitals, chief minister house, governor house, zoo and many other agencies have not paid their dues to Wasa for the last several years. All efforts made by Wasa authorities in this regard have failed.
The other problem with the agency is a political one. As a public service agency, Wasa has always been under pressure from successive governments. Political interference in decision making has been a regular feature. Furthermore, the numerous organisational controls simultaneously under the District Nazim, DG LDA, Minister Housing, Secretary Housing and Chief Minister's Secretariat have also adversely affected Wasa's performance.
This factor alone has contributed towards the agency's inability to take any vital decisions when needed. For example the agency could not even take a decision to reduce its pumping hours, which are now over 18 hours a day. The decision could have avoided the recent raise in water tariff. Similarly scores of new tube-wells were installed recently on political basis, without due consideration for the impact on electricity bills and underground water reservoirs.
"Wasa has also not been able to upgrade its existing institutional strength as there has been no recruitment for more than 10 years. There is a shortfall of about 40 engineers and 10 finance and human resource graduates. The total shortage of staff in different categories is above 1200 but the problem can be solved if the agency is given the freedom to fill these vacancies," a senior Wasa official tells TNS.
Japan International Corporation Agency (JICA) is expected to release a special grant of Rs 789 million to Wasa for the upgrade work of sewer and water infrastructure. But JICA is expected to withdraw its Retrieval of Sewerage and Drainage System project in case Wasa is privatised. This grant could have solved a lot of Wasa's problems and similar other international donors could have helped provide financial assistance in setting up a waste water treatment plant.
Meanwhile, Chairman P& D department Suleman Ghani denies that Punjab government has taken a final decision about Wasa's privatisation. "We are just conducting a study through IFC to find out comprehensive and technical details about Wasa. In the light of this study, the government will look into all possible options for private sector investment or some reforms in Wasa's organisational structure. It was vital for us to find out about the water and sewerage services in Lahore and other major cities of the province. Many developing countries including the Philippines, South Africa and Ivory Coast have benefited from private investment, so why shouldn't we," he says.
CURRENT AND SAVING ACCOUNTS
As a solution to public delivery failure, the World Bank supports private participation. It says increased cost recovery and privatisation will actually expand access to clean water and sanitation, even for the poor.
There is no doubting the fact that an acute worldwide crisis over water is brewing. According to the United Nations, 31 countries are now facing water scarcity and 1 billion people lack access to clean drinking water. Water consumption is doubling every 20 years and yet at the same time, water sources are rapidly being polluted, depleted, diverted and exploited by corporate interests ranging from industrial agriculture and manufacturing to electricity production and mining. The World Bank predicts that by 2025, two-thirds of the world's population will suffer from lack of clean and safe drinking water.
Rather than taking the dramatic action necessary to protect precious water resources, governments around the world are retreating from their responsibilities. Instead of acting decisively, they are bending to the will of giant trans-national corporations that are poised to profit from the shortage of water. Fortune magazine has predicted that "water is the oil of the 21 century" and corporations are rushing to invest in the water business.
Giant water, energy, food, and shipping companies have plans to buy water rights, privatise publicly owned water systems, promote bottled water, and sell bulk water by transporting it from water rich areas to markets desperate for more water. For example, in the United States, where some regions are already suffering from serious water shortages, multinational corporations from Vivendi to Nestle are poised to make a profit on water. Some corporate interests even want to sell bulk water from the Great Lakes, the world's largest freshwater system.
Coming to developing countries, the majority of poor villages and urban slums are not yet served by a piped water system. Often, alternative water sources of the poor are polluted rivers, lakes and shallow hand-dug wells. Some are dependent on street vendors, which cost more than paying fees for piped water. Middle class consumers in many countries pay subsidised rates, becoming burdens to government and preventing the expansion of water infrastructure for the poor.
The World Bank and the Asian Development Bank (ADB) themselves recognise that the poor suffer most from water shortage. The Bank also agrees there is a need to take urgent action to conserve water and meet the water needs of various users. Extending access to clean water for the poor and improving water management has, in fact, been used as the main campaign of the World Bank and as the basis for ADB's water policies. Unfortunately, these very water policies already spell more harm for the poor and forebode greater degradation of the world's diminishing water resources.
WORLD BANK'S WATER PRIVATISATION POLICY
The World Bank initiated water sector reforms aimed primarily at privatising water utilities and commercialising water resources. The water privatisation policy of the World Bank articulated in a 1992 paper entitled 'Improving Water Resources Management' proceeds from the belief that water availability at low or no cost is uneconomical and inefficient. Even the poor should pay.
As pointed out in the World Development Report 1992, the poor need a wider range of options so they can choose the level of water services for which they are willing to pay, thereby giving suppliers a financial stake in meeting their needs.
The World Bank argues that public sector providers waste water too much, typically losing 40 to 50 per cent of their volumes through leaks and theft. Consequently, by the bank's logic, this accounts for governments' inability to expand services to urban slums, small towns and villages. Moreover, governments commonly cite issues of corruption, inefficient water service, and inability to provide piped water access to the poor as reasons for inviting World Bank assistance.
As a solution to public delivery failure, the World Bank supports and vigorously pushes private participation. It asserts that increased cost recovery and privatisation will actually expand access to clean water and sanitation, even for the poor. "Effective water resource management requires that water be treated as an economic good," says the Bank, adding that "private participation in water and waste-water utilities has generally resulted in sharp efficiency gains, improved service, and faster investment in expanding service."
If one were to believe World Bank rhetoric, the poor's need for water is always its main concern. In connection, as stated in its urban water and sanitation policy, it has assumed the role of advising and assisting countries in developing regulatory frameworks and in designing viable, clean transactions that reconcile the interests of investors and consumers, and recognise the needs of the poor.
Since the Bank views current water tariff rates in several developing countries as below the market rate, one advice appears to be charging higher rates which the bank deems necessary to give private companies an incentive and sustainable profit, and allow them thereafter to extend piped water service to the poor. The privatisation process would also benefit from commercialising operations at all levels, attracting private investments, substantially increasing water prices and agricultural power tariffs, and creating water markets.
Behind the pro-poor avowals of multilaterals, however, the standard policy advice of the International Monetary Fund (IMF) and the World Bank remains largely anchored on prioritising debt payments by cutting government subsidies, increasing revenues, and shrinking the public sector through privatisation. More specifically, this means selling public enterprises such as the water, electricity and telecommunications sectors to private corporations. In effect, the Bank and Fund force borrowing countries to adopt free market policies, such as slashing government spending by privatising public services towards removing barriers to trade, and forcing nations into export orientation, in the belief that this would enable a quicker way of repaying their debts. The experience of developing countries that privatising public service assets has increasingly reduced the poor's access to health care, water and power services, education, etc. continues to be ignored.
The World Bank argues that developing country governments are too poor and too indebted to subsidise water and sanitation services. Not surprisingly, the World Bank has included water privatisation as one of many conditions that would allow developing countries to access the portfolio of loans in its Country Assistance Strategy (CAS).
ADB'S NEW WATER POLICY
On January 16, 2001, eight years after the World Bank released its water policy, ADB's board of directors approved a comprehensive water policy of its own. Among others, it recognised the Asia and Pacific region's need to formulate and implement integrated, cross-sectoral approaches to water management and development.
Generally, ADB seeks to promote water as a socially vital economic good that needs increasingly careful management to sustain equitable economic growth and reduce poverty. ADB will advocate a participatory approach in meeting the challenges of water conservation and protection in the region with a national focus on water sector reform as one of the principal elements. All borrowing countries must formulate and implement integrated cross-sectoral approaches to water management and development.
Water use efficiency, cost recovery, institutional strengthening and private sector participation are key instruments of the policy. From ADB's perspective, "Water must be utilised by those who render the most economic advantage." As a consequence, those who can afford the cost will be prioritised over the poor who have the least purchasing power. Ironically, the ADB Water Policy falls under its poverty reduction strategy, which can only rebound to water commodification and privatisation.
'Full cost recovery' has been proposed to conserve water and increase system efficiencies. The ADB claims that "the poor are increasingly willing to pay for water service that are predictable and effective" and "governments have been consistently mistaken in their assertion that charging farmers for irrigation service is not possible because of their inability to pay."
The ADB has a long history of involvement in the Asian water sector, mainly in terms of project investment loans. Its intervention in water policy reform is, however, more recent, following the World Bank's initiatives. As its water policy states, "we will advise to include cost recovery principles in national water policies and strategies".
THE CASE OF PAKISTAN
The government of Pakistan, at the urgings of the ADB, instituted the Water Resources Strategy Study, which the Ministry of Water and Power, Office of the Chief Engineering Advisor / Chairman Federal Flood Commission had undertaken. The study began in July 2001 with the main objective of preparing a road map for future development of the water sector toward more efficient service delivery and optimum utilisation of resources to meet the competing demands of all water users in the future.
As 95 per cent of Pakistan's water resources are used for agricultural purposes, the role of the agriculture sector is also discussed extensively, with recommendations and a proposed strategy for a closer relationship with the water sector.
The Strategy and the Medium Term Investment Plan (MTIP) emphasise institutional, management and financial matters as well as infrastructure. It prioritises equity in water allocation, improving and maintaining the quality of water, the conservation of the country's water resources and the need for efficiency and financial sustainability in water service delivery. This means privatisation and full cost recovery of water utilities and water resources. The study was funded through the ADB's Technical Assistance Programme.
A few years ago, the World Bank and Pakistan government decided in favour of privatising water as part of a larger push to privatise services. When the public found out the details and protested the scheme, the Bank and the government cancelled the plan. Very recently, a memo by a visiting ADB mission called again for water privatisation as a condition for extending further financial assistance to Pakistan, not just to its water sector.
The government points to the massive losses that the public sector makes; and the World Bank stresses quite correctly that it is the poor who bear the burden of these public sector losses because of Pakistan's very regressive taxation system. But the only thing that government ended up doing was to bring in the private sector, and basically substitute private profit for public corruption. The World Bank proposed that the government guarantee a profit to a private company to do the job. And the government of Pakistan reportedly agreed with the proposal.
DEBATE: PRIVATE VS PUBLIC
Can a private company manage the infrastructure of water services? The divergent views:
By Ather Naqvi
Since an agreement has been signed between the Planning and Development Department of the Punjab government and the International Finance Corporation (IFC) to conduct a study on privatising water management in Lahore, questions are being raised about the existing and future infrastructure of the Water and Severage Agency (Wasa). One of the issues relates to the existing infrastructure for water services, its operational capacity and effectiveness.
Wasa authorities claim that a private company, if and when it takes over, will not have to accomplish much as far as the laying of infrastructure is concerned. The decision about which area to prefer for laying infrastructure will also be taken by the same company and their concern may be monetary rather than people's welfare. "Such an authority will make its own decisions regarding laying of infrastructure. It is to be seen if they prefer the rural areas in the vicinity of Lahore or concentrate on the main Lahore or both," says Naveed Pervaiz, Executive Engineer Wasa. "The chances are that rural areas will be neglected as it costs more to provide water and sanitation facilities to an area somewhat cut off from the main city."
"The infrastructure in the shape of water and sewerage pipes, tube wells and pumping stations etc is all available. There is no need to lay any new infrastructure, at least at a big scale in the city," he says. He understands though that the number of pumping stations may not be adequate to meet future requirements. "There are about 350 water pumping stations for Lahore's six million population. In view of the fast expanding housing societies, we may require more water pumping stations and sewerage lines."
Pervaiz explains that poor condition of the infrastructure and the delay in laying the infrastructure has not been due to Wasa's inefficiency but because of unavailability of funds. "A project usually gets delayed when there are no funds available and that does not mean inefficiency on our part."
Pervaiz says privatisation in itself is no guarantee that the investment in infrastructure will go where it is needed. "Investing in urban water infrastructure makes economic sense to an investor as it generates more revenue in comparison with rural areas with a scattered population which requires bigger investment and generates less revenue. A government does not think along these lines. Providing services to its people is its main concern. It is not the same with the private investor. Even if the private sector invests in the water infrastructure of Lahore, it will think twice before investing in the rural areas" Pervaiz tells TNS.
Others do not wholly agree with Pervaiz' point of view. "I think there is no harm in making an unbiased assessment of ourselves. There is a huge deficit in the current Wasa budget. We badly need to invest in the existing infrastructure of the city if we want to ensure water supply to the citizens of Lahore," says an official of Wasa who does not want to be named. "The walled city is an example where the water and severage pipes are in a bad condition. Whosoever takes charge of Wasa will have to heavily invest in Lahore's infrastructure, especially in congested areas like the walled city. We also need to expand infrastructure towards Jallo area, Manga Mandi and Raiwind Road, etc where the water table is not that low," he says.
Pervaiz believes provincial governments should think about bringing in investment where it is needed the most - in areas like Karachi and Islamabad. "Water is about a 100 feet deep in Lahore while it is about 50 feet deep in the adjoining rural areas. We're not going to have any major crisis as far as the availability of water is concerned. Whereas Karachi and Islamabad are two areas where investment is badly needed," he tells TNS.
To some Wasa officials, things are not as bad as some people portray. "Yes there are some problems with management and availability of funds for developing new infrastructure but these problems can be resolved without resorting to privatisation." says Muhammad Khaleeq, sub engineer Wasa. "A private company's main objective will be to make money. It will be very selective in investing in infrastructure. For example, water today is supplied to the walled city through a big water tank commonly known as Pani wala talab. It can store 1 million gallons of water. If they replace this system with a new one, they will have to install many new water pump stations. That means the dwellers of the walled city will have to pay more in revenue bills. We can make this system efficient if we add some water pumps to the tank. In my view instead of looking for privatisation we should give more attention to making our own system efficient. That will cost us less. Only a commitment on the part of the district government is required. Our consideration should be pure water at low cost, " he says.
Suleman Ghani, Chairman Planning and Development (P&D), government of Punjab believes that it is a bit too early to talk about how effective the new system will be. "The IFC has just started looking into the possibility of whether they will invest here or not. This is going to be an experiment. There is no final decision on it as yet," he says.
Ghani believes that if privatised, the working of Wasa will definitely improve. "A private company will improve the services by minimising water leakages. This is one of the main pluses of a private company. That will also mean more pure water because they also intend to install a water treatment plant in Lahore. Privatisation of the water services has been applied to about 35 cities in the world and in most cases it has been a success." he says.
A PERSONAL SUPPLY SYSTEM
Privatisation was to be the magic answer to Karachi's water woes. Only the Sindh High Court thought otherwise.
By Zulfiqar Shah
Shaista Baloch, 40, a schoolteacher and resident of Lyari, has a basic complaint to make: no drinking water at home. Her two sons have to alternate between college and visits to their grandmother's house about half a kilometer away from home to keep the water supply running. "They have to carry water from their grandmother's home," Shaista says. "Look at their hands! I really feel sorry for them but what do we do? We don't get water up in our house."
The story multiplies into hundreds and then thousands, and it transcends localities. Karachi, a bustling city of 13 million inhabitants, a city by the sea, cannot fulfil the water needs of its residents. The finger is pointed at the Water and Sanitation Department of the city district government, previously the Karachi Water and Sewerage Board.
Karachi gets about 500 Million Gallon Daily (MGD) water against its need of 650 MGD. And there have been proposals, and yet more proposals on how to meet the shortfall.
One of the proposals moved in 1996-97 was privatisation of this public service under World Bank's Private Sector Participation (PSP) strategy. Though civil society actors strongly objected, the move was only halted after a Sindh High Court (SHC) ruling. On a writ petition by the Karachi Water and Sewerage Board's trade union, the SHC ruled that such "a vital and sensitive" institution cannot be placed in private hands.
"There was a lot of resentment, and so the government could not proceed at that time. But I believe privatisation is always on their agenda. There was talk about it a couple of years ago and in recent months as well," comments Professor Nauman, who represents CREED, which campaigns for safe and adequate water for all citizens.
He says the experiment of privatising provision of drinking water has failed in places such as Manila.
"There is no need for such experimentation in Karachi. It will simply snatch the right of having water from the poorer sections," Professor Nauman says. Experts say in case of privatisation, the tariff could go up by 300 to 500 per cent and the service will be limited.
"Water is a basic human right and you cannot commercialise it," says Mohammad Younus, an architect by profession and director of the Urban Resource Center (URC), an NGO working for better urban facilities. "If it is privatised, only those who had the money will get it and poor people will left high and dry."
Those who are for privatisation argue that it will help in improving the efficiency of service and delivery. Professor Nauman replies it is possible to stick to the exisiting system and yet be efficient. If there are problems, maybe the distribution system can be put under private management - but privatisation of the service itself is not acceptable. "Private management is different than privatisation of service," he explains.
Since 1998-99, the distribution of water by tankers is being supervised by Pakistan Rangers, a para- military force deployed in the city in the early 1990s to tackle the law and order. The general impression is that it has hardly improved the situation. Even General Musharaf used the term 'tanker mafia' a couple of months ago at the time of groundbreaking ceremony of desalination plant for Creek City, a venture of the Defence Housing Authority (DHA).
"Supply through Rangers has created problems of its own," comments Younus. "The cost has increased and no one can dare ask the Rangers since they are in uniform." Complaints that these tankers sell water are frequent - a charge that the Rangers officials deny. They say they provide free of cost water to areas which are not connected by pipeline, and that service under their supervision has improved as compared to when it was being run by the water board.
The latest project undertaken to address the acute water shortage problem is the construction K-III, which will provide an additional 100 MGD water to the city. But experts say since the problem lies with the management and distribution of water, the additional supply may not be the answer we are looking for. The system has to be overhauled and made efficient.
"The main problem is leakages and inequitable distribution of water," says Professor Mohammad Nauman. "Any addition is good, but I don't think it will help to solve the problem. You have to address the basics - system losses and leakages, a just and equal distribution of water, efficient management."
Authorities admit to 30 to 35 per cent supply losses, a figure not too far apart from the independent estimate of 40 per cent losses and leakages.
"It's unfortunate that despite of huge investment authorities have not been able either to reduce leakages or correct the distribution system," says Mohammad Younus.
He says KW&SB has accumulated loans of Rs. 42 billions during the last 15 years in the name of improving systems, which are being deducted from the development budget of the Sindh government and ultimately paid by the common citizens.
"You will be surprised to know that the board has not been able to do proper metering," he adds, implying that without a meter system, equal distribution is simply not possible.
The distribution of water in Karachi so far has remained power-based. You must have money or political influence to have your bucket of water ready. "Those who have this power get more than their share. Those who don't, must suffer," comments Younus.
The advent of the city governments should have broken the old system. There was talk of devolution when the five Karachi districts were subdivided into 18 towns and 75 union councils. Three years later, the water supply and distribution system is yet to be devolved at town and uc (union council) levels properly.
In the absence of a metering system there are no figures as to which town and uc gets what amount of water. "A devolution of the water board at the town and uc level is important, besides a strict adherence to the meter system," suggests Younus.
EXPERIENCE TAP
Water privatisation has largely been unsuccessful the world over. Case studies of different countries where the water sector has been privatized:
By Hamid Ali
In most of the countries where water management has been privatised, water prices have increased manifolds without improving access to the poorest sections of the population as had been promised.
Long-term concession agreements, signed by respective governments since 1990, through IMF, World Bank and other financial institutions had to be amended on public pressure. In some cases, the private companies filed suits with international courts against governments for backing out of these agreements. The cases are still pending before international courts.
There have also been instances where financial institutions refused to release promised grants to some of the developing countries when they failed to fulfil commitments with private companies that had been given control of public water agencies. In almost every case of water privatisation, the governments, especially in developing countries did not take the public into confidence.
Clauses in respective contracts to prevent tariff increases for a certain period of time have largely not worked. For example in Buenos Aires, Brazil and Manila, the Philippines an increase in water rates was announced within a few years, eventually offsetting the initial price cut. Even in industrialised countries like France and the UK, sharp increases in rates were reported following privatisation.
Following are a few cases of water sector privatisation which may help in understanding the issue.
MANILA
In August 1997, two private consortiums took over the Metropolitan Waterworks and Sewerage System (MWSS) in Manila with a 25 year concession agreement. Initially, it was hailed as a model example of a large water privatisation project in Asia, with water rate reductions both in East and West zones.
However, in December 2002, one of the concessionaires announced it was pulling out of the concession. The dispute is now in international court. In Manila, both concessionaires have not achieved their targets. The number of staff has decreased by 46 per cent - from 7,600 to 4,100, thus providing an efficiency indicator, staff per 1,000 connections went from 9.8 to 4.0.
The issue of tariff also came forward as being complicated. There are four categories of users, namely residential, semi-business, business I, and II. Tariffs are lowest for households and highest for large-scale industrial or commercial users of water. Residential and semi-business connections have nine blocks, while the business connections are detailed in 33 blocks.
TUCUMAN, ARGENTINA
The 30 years concession agreement was signed in July 1995 for privatisation of sewerage and water supply services. The French company Aquas del Aconquija doubled the water tariff within a few months to meet its investment requirements specified in the concession agreement. In October 1998, the concession agreement was terminated. The French Company agreed but quickly filed a US $100 million suit against the government.
COCHABAMBA, BOLIVIA
Cochabamba, the third largest city of Bolivia, signed a 40 year concession agreement with a US and Italian consortium under pressure from the World Bank. Subsequently, the World Bank called for a full cost water pricing and instructed the Bolivian government not to subsidise water. The firm (consortium) immediately modified the price structure which increased water bills by 35 per cent. Moreover, some other measures were taken by the firm to maximise its profit. As a result, there were wide protests during which the Bolivian army killed 9 people, injured hundreds and arrested several local leaders and Martial Law was imposed. Resultantly, the government gave in and cancelled the privatisation contract. This was the first big water riot of the 21st century.
NAIROBI, KENYA
In Nairobi, Kenya, the concession agreement was made with a French firm, Vivendi, in 1998. This concession also failed due to a public controversy on water billing. Consequently, the public resorted to getting a private supply from its own arrangements.
Similarly, privatisation experiments failed badly in Buenos Aires (Argentina), kuwazulu-Natal (South Africa), Budapest (Hungary), Thames Water & Northumbrian Water (UK), and Potsdam (Germany) among others.
MEXICO CITY
It is the only success case as the privatisation scheme was implemented gradually. Under phase-I, which started in May 1994, the contractors installed water meters, created a customer data base, and drew up network plans. The district government paid the contractors per test accomplished on the basis of unit price. By the end of 1996, the 1st phase was completed except for some meter installation. During phase II, meter reading, meter maintenance, assessment and distribution of bills was taken up. By 1997, the entire billing system was transferred from the government to a private consortium. Phase III included operation, maintenance and rehabilitation of water distribution and sewerage networks, which was done in 1998. These phases were completed in four years but the main control, monitoring and improvements remained under public sector management.
CHILE
The case of Chile shows how private giants of the developed world are entering in the water sector. The public water utilities in Chile had a good reputation for efficient management. In a 1996 comparative study of six developing countries, the World Bank hailed Chile's public water utilities as a model example of efficiency. Surprisingly, since 1998, most of the public water services in Chile have been partially privatised, mainly through the sale of shares to private water corporations. This shows that there is a perverse motivation for the private corporations to take over the most efficient public water utilities because of their promising profits, rather than taking over inefficient ones.
It is interesting to note how many industrialised countries have privatised their own water sector. The answer is 'a staggeringly small number'. Only in the United Kingdom (UK) and France does the private sector provide water supply services to the majority of the people. In the rest of the European countries water supply services remain predominantly in public hands.
In the UK, consumers have had to face a 95 per cent increase in their water bills over the last ten years. Profits of the private companies have been so high that the new Labour Government imposed a special windfall tax in 1997 on 'excess profits' of £1.6 billion in 1998 and 1999.
Meanwhile, wealthy countries, such as the US, continue to provide government subsidies for water and sanitation services. One major reason for the privatisation of the water sector is supposed to be the expectation of huge investments by the private sector itself. However, in reality, transnational water corporations often avoid risking their own assets. They manage to obtain money from international financial institutions.
The World Bank and other international financial institutions are promoting privatisation of water services in developing countries. One of the prime conditions for the renewal of World Bank and IMF loans has been the privatisation of a country's public water and sanitation facilities during the last few years.
In Tanzania, the government privatised and assigned assets of Dar es Salaam Water and Sewage Authority to private management companies without the knowledge or consent of its citizens. Crucial decisions about water privatisation and cost recovery were made by IMF officials with key government leaders behind closed doors.
Honduras was required to approve a framework law by December 2000 to facilitate private concessions in the provision of water and sewage services. Nicaragua was required to adjust water and sewerage tariffs to achieve cost recovery and to offer concessions to private management in key regions.
In 1999, the World Bank forced the Mozambique government to privatise its water services as a condition for a loan that would finance infrastructure development and debt relief.
The cooperation between local NGOs and international aid agencies, as is the case in Dhaka, shows a new type of management form. Small-scale private providers, as in Ho Chi Minh City, Cebu, Manila, and Paraguay, prove that they can all function efficiently in areas where a public provider cannot extend its services. They assume all the financial risks, invest in the entire infrastructure, and are still viable financially and contribute to improving the health conditions of poor households.
The Punjab government should choose a phased approach of service contracts rather than comprehensive concessions if the privatisation of water is unavoidable. Community participation is essential in any kind of water management. The lifeline provision of water should be protected and legitimised, if necessary, before anything else.
Letters from the Press
ENDING AID
[Javed Iqbal, Peshawar]
In one politically expedient season, most of the developing economies sat at the desk of grants, in the garden of donations under the lush green tree of loans. This was the time when the capitalist west was scoring points to contain the spread of the communist ideology. Among the development economists the only dissenting voice opposing the business of aid came from Peter Bauer, a recipient of the Milton Friedman Award on Economics and a former head of the London School of Economics. Through his scholarly papers he advocated the notion of ‘trade not an aid’ to accelerate the pace of economic development on the world scene. He ardently opposed aid with the reason that it will lead to flattening of governments and spread of corruption. But no one listened to him carefully and political expediency prevailed over economic wisdom.
With the end of the Cold War, ending of aid became a reality for the donors carrying the burden of economically sick and corruption-ridden economies on the one hand and preaching the philosophy of Peter Bauer on the other hand.
Thus, the trade is the only way out, leading us towards sustained economic growth. We have plenty of natural resources and hard-working people. The interest rates are sliding down; making the borrowing cost cheaper and providing a soft base for capital formation. The only things required are, to pick highly qualified personnel for the Ministry of Commence and Trade, and put an end to the NOCs to be issued by the governmental machinery. [The News]
WB LOAN FOR CBR
[Nisar Ali, Islamabad]
I was disappointed to read the news about the $102-million loan from the World Bank for a tax administration reform project. It is surprising that we need a loan from the World Bank just to improve the organizational efficiency and effectiveness of our revenue administration. Why can't we rely on our own resources to bring about such improvements?
Out of this loan, a sum of $54.3 million will be spent on software development. Why can't we develop software locally by spending in rupees? Why should we waste the precious foreign exchange of this poor country? It is astonishing the way our bureaucrats squander funds by taking unnecessary loans, knowing fully well that each and every cent has to be returned with interest. One fails to understand why our bureaucrats accept such loans. Just for personal gains and a few trips abroad? We should learn from the example of China which has excelled in every area without taking loans from the World Bank.
The Central Board of Revenue should on its own restructure and improve the efficiency of its departments. Where are our leaders who keep giving sermons on self-reliance? Is this only lip service to satisfy the masses?
I am sure we have the required capability and skill to undertake projects such as the CBR restructuring. We only need to appoint deserving and sincere people at the helm of affairs. [Dawn]
BULLETPROOF CARS
[K. Muzaffar, Rawalpindi]
Contradictions in our priorities and spending are truly amazing. If we can afford cars costing a mind-boggling Rs100 million each, think how many schools, dispensaries, roads, etc., can be provided by this money to the public.
If these cars are necessary for the protection of VVIPs, will any be allocated to the Chinese nationals working on the Gomal dam, particularly since we sought an investment of $1 billion from China only a few days after one of their nationals was killed in an operation to rescue him and his colleague from their abductors? [Dawn]
MADNESS ON THE ROAD
[Javed Khan, Haripur Hazara]
This is a plea for enforcing some sanity on our roads. To say that this is a crying need would be stating the obvious. However, this is not just a case of observing traffic regulations. With an exploding population - most of them gravitating towards urban centres for a livelihood - congestion on city roads is bound to increase.
The problem is compounded by the absence of civilized public transport and mass transit system. No mega city in the world today can afford to be without one - waste of time and fuel, environmental degradation, loss of precious human lives, chaos, and nerve-racking traffic jams are the inevitable fallouts of the mess we have created on our roads.
The latest thing to aggravate the situation is security concerns for our VVIPs and VIPs, whose comings and goings heap misery on ordinary road users. The government can ignore this situation, being oblivious to public concerns, but in doing so it is setting scene for an explosive situation. Thirty bulletproof cars for Rs3 billion will achieve little for the common man.
The same amount could be put to better use as seed money for an overhead rail track between Rawalpindi and Islamabad, saving billions and easing the misery of harried commuters. [Dawn]
POLICE ESCORTS FOR VIPS
[M. M. Alam, Karachi]
Out of the 27,000 policemen available for the protection of about 15 million Karachiites, 13,000 personnel, 100 vehicles and a large number of motorcycles are reportedly deployed as escorts and gunmen for the security of VVIPs and mostly for persons not legally entitled to any such security.
In Karachi there are 89 police stations manned by 55 to 60 policemen each. If the above-mentioned force is used here, the strength will increase to 160-200 policemen per police station. This could cause the crime rate to drop substantially.
Even industrialists and businessmen who can easily afford private security get approval from the police IG for police guards. Doctors and the likes too want police protection. Also, ex-officials, including former governors and two former home secretaries, move with escorts. Civil judges are not entitled to any armed guard but they too like to have one. Similarly, ministers, MNAs and police officials and others enjoy such privileges while the silent majority is exposed to the danger of lawlessness.
Police guards are required to be in uniform and display name tags, but they move all over the city in civvies, brandishing sophisticated weapons. Instead of ensuring a sense of security, they spread terror. [Dawn]
PLURALITY OF VIEWS
[Muhammed Iqbal Abid, Karachi]
This is with reference to Mr Muhammad Ilyas Khan's letter (Oct 18) in which he complained about 'offensive' programmes being broadcast by private TV channels and FM radio.
In this regard he mentioned a religious programme in English in which a religious scholar made comments on family planning which Mr Khan found offensive. In another instance, he accused the host of an FM radio station of condoning lax behaviour among youth. I may not share the views expressed in the two programmes, but I believe that just as Mr Khan is entitled to express his views, so are the hosts of the programmes mentioned.
Asking the government to put a stop to such programmes is no solution. People are intellectually mature enough to distinguish good from bad. Plurality of views is what democracy is all about. Attempts to stifle this culture would be counter-productive.
Next time Mr Khan find's something offensive being aired on TV, he has the choice to change the channel or switch off his set, instead of complaining to Pemra. [Dawn]
'SHALLOW OSTENTATION'
[Anil Khan Luni, Karachi]
This is with reference to the decision of the Supreme Court restoring the ban on wedding meals and other wedding extravaganzas. As an ordinary citizen I am glad that such a step has been taken, but as a student of law I am disturbed as laws are being enacted which curtail the freedom of an individual to make decisions for himself.
There are certain sovereign powers of each state, which are vaguely termed as police powers which relate to the safety, health, morals and general welfare of the public. But there is a limit to the valid exercise of the police powers by the state. It needs to be realized that changes in a society should not always be brought through the force of law but through other means such as creating awareness among the people. The reason for this is that there is an apprehension that every government will try to impose its perspective of life on the citizens. For instance, I fear for the day where religious parties are able to acquire majority seats in parliament and start to enact laws to regulate the lives of every individual.
It is hoped that the government will try to convince people rather than compel them to do what they think is the right thing to do. [Dawn]
ALLOW WEDDING MEALS
[Isa Daudpota, Islamabad]
The state has the right to impose reasonable taxes on its citizens. But it is neither the government’s nor the Supreme Court’s right to tell a citizen what to do with his or her savings.
For parents to use a court ruling against such wedding meals shows a slavish mentality. Surely such a crutch provided by the state ought to be rejected.
Wasting money on weddings is silly, but people ought to have the right to do that. Instead of discouraging lavish weddings, the government would do better if it used other means to transform peoples’ thinking. The government could encourage TV channels to broadcast dramas that encourage simple living; reduce waste within the government itself; and ensure that the lifestyles and bank balances of the high-ups in the bureaucracy and military are in keeping with their declared wealth. [Daily Times]
REVERSE DISCRIMINATION
[Haroon Hoti, Mardan]
I have noticed that the media has been gripped by a wave of feminism, which I believe is a positive thing. But one must raise two important issues over here: firstly, it is not right to present women as ‘helpless victims’ since the last thing they want is a patronising attitude; and, secondly, by mentioning the ‘plight’ of women we tend to marginalise the male members of our society.
Our society is full of prejudices and stereotypes, not just about women but also about men. They are held responsible for their actions since they are sensible and rational and hence are not expected to express their emotions. They are the providers; solve problems; and don’t cry. After all, they are men!
Mostly men are stopped at security checkpoints for reasons I fail to understand. Violence and crime are automatically assumed to be the work of a man, and hence, the law punishes men more than it punishes women.
Men have to live through this reverse discrimination every day, making me feel that both genders are oppressed in their own ways. So, if anyone believes that women’s problems stem from the patriarchal structures of society, perhaps he/she should think again: those at the helm of patriarchy are not free themselves. The macho image associated with men must come to an end for both genders to survive happily. [Daily Times]
FreePakistan News-Briefs
BUSINESS ENVIRONMENT IN PAKISTAN NOT FRIENDLY
According to the World Bank report "Doing Business in 2004: Understanding Regulations", that attempts to compare the regulatory environment across countries, starting a business in Pakistan requires only 22 days (the lowest in the sample {ASEAN and South Asian countries}), with India at the bottom with 65 days. However, businessmen have to go through the highest number of procedures in China and Pakistan and the least in Bangladesh. Businesses have to face about 30 legal procedures to enforce contract procedures in Pakistan, the highest amongst the selected countries. It also requires substantially more time and cost for a settlement in Pakistan. Enforcement of contract is the quickest in China, with relatively lower cost. However, procedural complexity index in aggregate suggests that the more complicated procedures exist in South Asian countries (Sri Lanka, India & Pakistan).
SC ASKS GOV TO ENCOURAGE INDUSTRIALISTS
Justice Iftikhar Muhammad Chaudhry of Supreme Court of Pakistan has observed that due to the dual standards of the government Gadoon Industrial Estate had been collapsed and now Hattar was also being shut down. He has asked the government to cooperate and encourage the industrialists and let them work smoothly. He said, “Instead of boosting up the industries, the government is doing de-industrialization.”
DIRECT TAXES RISE SHARPLY
According to the 2004 Annual Report of State Bank of Pakistan, the collection of direct taxes rose sharply to 8.8 % year on-year-basis in FY04 compared with 6.6 % in FY03.
RS.306 BILLION NOTES PRINTED IN 5 YEARS
The Federal Cabinet has been informed that during the last 5 years (1999-2004), new currency notes worth Rs.306 billion were printed and pumped into circulation.
AUDITORS NOT TO FRAME TAX EVASION CHARGES
The government has terminated countrywide tax audit department activities to prevent mounting corruption and harassment of the taxpayers. The Central Board of Revenue has taken the decision in view of the bad mane the 900 tax auditors brought to the government over the past three years.
PM: CAR PREMIUM TO BE ELIMINATED
The Prime Minister Shaukat Aziz is optimistic about the rationalization of prices of cars and has hoped that the premium on cars would be eliminated with the start of v
